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On March 5, 2019, Scott Gottleib, the Commissioner of the Food and Drug Administrations (FDA) announced his resignation as of the end of March, 2019. This follows his recent statements as to the effect of the changes in law with respect to hemp under the 2018 Farm Bill (the “Farm Bill”). Under the Farm Bill, hemp, which is now defined as the plant Cannabis sativa L. and all derivatives of the hemp plant, with extremely low concentrations of THC (less than 0.3 percent on a dry weight basis) are no longer subject to the Controlled Substance Act (the “CSA”). In addition, it is now permissible to transport hemp across state lines. Although thought at first by many to allow the sale of cannabidiol (CBD) products across the United States, the Farm Bill preserved the authority of the FDA to regulate products containing CBD under the Food, Drug and Cosmetic Act (the “Act”).  On the same day that the Farm Bill was signed into law, Commissioner Gottleib reiterated that the Act allows the FDA to regulate all CBD products, whether or not the compound is derived from hemp, and that when these products are intended to be used for the diagnosis, cure, mitigation, treatment or prevention of disease, they are considered new drugs and it is a violation of law to market them as such if they have not gone through the FDA drug approval process. He also indicated that it remained unlawful under the Act to introduce into interstate commerce food or dietary supplements containing added THC or CBD.  Given that violations of the Act may result in monetary and criminal penalties, many entrepreneurs looking to enter the CBD market, along with those already in play, are grasping to understand the consequences of marketing and selling hemp derived CBD products nationwide.

Commissioner Gottleib did go on to acknowledge Congress’ clear interest in fostering the development of hemp products and to make CBD available outside of the pharmaceutical industry. Accordingly, he  announced plans to work on new rules to allow companies to produce consumable products containing CBD. The Commissioner stated that the FDA would kick off the rulemaking process in April by doing the following: (1) amassing a working group to examine the issues involved in regulating CBD and (2) holding a public meeting to investigate possible rulemaking that would allow CBD to be lawfully sold in food and supplements through a simpler review process than what comes along with being defined as a “drug” under the Act. The Commissioner also indicated that he was willing to work with Congress on a legislative solution if a rulemaking process was too burdensome for his agency.  The Commissioner’s statements signaled a clear commitment to address CBD regulation and institute a regulatory framework for the sale of hemp-derived CBD throughout the country.

With Commissioner Gottleib’s resignation, it remains to be seen whether his replacement will agree with his sentiment on creating new rules to establish a less burdensome regulatory pathway for CBD products, leaving a growing billion dollar industry with many questions.

In a recent decision, United States v. Gilmore, the U.S. Court of Appeals for the Ninth Circuit reinforced the importance of complying with drug laws for doing business in the Cannabis industry. In Gilmore, hunters provided a tip to local authorities on a cannabis grow site in El Dorado County, California. Upon executing a warrant, the officers seized over 100 cannabis plants and detained three men. One of the men claimed he rented the property with the intent to cultivate medical cannabis legally under California state law. Nevertheless, the authorities obtained an indictment charging the men with manufacturing cannabis plants due to the grow site being located on federal land.

Since 2015, Congress has barred the Department of Justice (DOJ) from using appropriated funds “to prevent [certain States, including California] from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana.” See Consolidated and Further Continuing Appropriations Act § 538 (“§ 538”). Although one defendant plead guilty, the other two defendants claimed that § 538 prevented the DOJ from prosecuting them since medical cannabis cultivation is legal under California state law. The Ninth Circuit rejected the defendants’ argument on the premise that “nothing in California law purports to authorize the cultivation of marijuana on federal land.”

As a result, the DOJ’s enforcement of federal laws on federal land does not prevent California from otherwise implementing its medical cannabis regime. The Ninth Circuit held that because § 538 does not apply to offenses committed on federal land, state law defenses are irrelevant. Also irrelevant, is whether the defendants knew the grow site was on federal land since the government is not required to prove such knowledge to convict under 21 U.S.C. §§ 841 and 846.

For New Jersey businesses involved or invested in the cannabis industry, Gilmore stands as a reminder that operations must comply with both federal and state law. New Jersey businesses should be concerned with doing their due diligence before utilizing any property on federal land or subject to federal laws. Overlooking to do so may not only be bad for business but could lead to criminal penalties.

Special thanks to Leo D. Bronshteyn, Summer Associate, for his contributions to this article.

Since 5 new medical conditions were added to the list of conditions available for treatment with medical marijuana in the March 2018 Executive Order 6 Report, over 7,000 new patients have been added to the patient pool. Due to the significant expansion of the patient pool in the past few months, the New Jersey Department of Health (DOH) has determined that additional treatment centers are necessary to meet the needs of the current and future patients in the Medical Marijuana Program.

As of today, the New Jersey Department of Health Division of Medicinal Marijuana released a  Request for Applications (RFA) for up to six (6) vertically integrated alternative treatment centers. The applications will be divided between the Northern, Central and Southern regions of New Jersey with up to two alternative treatment centers per region. The DOH stated in the RFA that it anticipates the release of two additional RFAs in the Fall of 2018 and Winter of 2019 for additional cultivator and manufacturer licenses and dispensary licenses, respectively.

On March 23, 2018,  in response to Governor Murphy’s Executive Order 6 which directed the New Jersey Department of Health (“Department”) to review New Jersey’s Medical Marijuana Program (the “Medical Marijuana Program” or “Program”), the Department issued  its report  focusing on how to expand the Program’s scope and patient access to medical marijuana (the “Report”).

The Report focused on the following four principal areas:

  • The rules for siting of dispensaries and cultivation facilities and the number of alternative treatment center (“ATC”);
  • The conditions for physicians participating in the Program and prescribing medical marijuana;
  • The number of medical conditions which qualify for the Program; and
  • The maximum monthly product limit, THC dosage limits and the types of medical marijuana products available for patient use.

Certain aspects of these recommendations may be affected by Department regulatory action, while others will require amendment of the existing New Jersey Compassionate Use Medical Marijuana Act (the “Act”).

In order to service the growing population of patients with conditions treatable by medical marijuana, the Department plans to amend the existing regulations to permit ATCs to dispense medical marijuana at satellite locations and permit more than one cultivation site per ATC, subject to Department approval. The Department also plans to create an endorsement system to allow ATCs to engage in some combination of production (including edibles), cultivation, and dispensing designed to increase the supply and availability of medical marijuana.  As stated in the Report, the goals of these amendments are to increase the supply and access to medical marijuana for qualifying patients. The Report also makes the statutory recommendation to amend the Act to permit the existing six (6) licensed ATCs, which are statutorily required to be non-profits, to operate as for-profit companies.

The current regulations require that a physician interested in providing care to patients who qualify for medicinal marijuana to first register with the Department, creating a limited number of doctors who can prescribe and treat qualifying patients. The Report indicates that the Department plans to eliminate the physician registry in Spring of 2018 to ensure that any and all New Jersey doctors meeting the good standing  requirements set forth in N.J.A.C. 8:64-2.5 may prescribe medicinal marijuana for patients meeting Program requirements.

Prior to March 22, 2018, the conditions that qualified for treatment by medicinal marijuana under the  Act  were limited to (i) seizer disorders, intractable skeletal muscular spasticity or glaucoma (provided that  such conditions were resistant to conventional medical therapy), (ii) HIV, acquired immune deficiency syndrome or cancer (provided that  sever or chronic pain, nausea, vomiting, cachexia or wasting syndrome resulted from such condition or treatment thereof), (iii) amyotrophic lateral sclerosis, multiple sclerosis, terminal cancer, muscular dystrophy or inflammatory bowel disease, (iv) a terminal illness (provided that a physician determined a prognosis of less than 12 months of life), or (v) other medical conditions approved by the Department by way regulation. As outlined in the Report, a final agency decision was made to effectuate the addition of the following categories to conditions qualifying for treatment by medical marijuana: chronic pain related to musculoskeletal disorders, migraines, anxiety, chronic pain of visceral origin, and Tourette’s syndrome. The Report also recommends an amendment to the Act permitting medical marijuana to be used as a first-line treatment rather than a last resort for the illnesses described in section (i) above.

Under the current Program, physicians are limited to prescribing two ounces of medicinal marijuana to patients within a 30 day time period. According to the Department’s findings set forth in the Report, physicians should have discretion to authorize more than the Program’s current two ounce limit. As a result, the Department is recommending that the statutory limit be increased to four ounces, which aligns more with our neighboring states such as New York, Pennsylvania and Delaware. The Act presently restricts use of edible marijuana products to qualifying patients who are minors. As stated in the Report, the ingestion of medical marijuana is healthier than smoking, the Report, therefore, also recommends amending the Act to permit the manufacture of edible and topical products and their use by patients.  The Report also provides that the Department will eliminate the regulatory dosage limit of 10% THC limit to allow for more effective treatment of the debilitating medical conditions covered under the Program.

The Report and recommended expansions to New Jersey’s Program  set forth above evidence both the Governor’s and the Department’s goal of growing all aspects of the Program related to the production of and access to medicinal marijuana.